Here's my current market status outside of its Latin nutshell:
Currently short real-estate (residential & commercial) & financial (since 3Q 2006).
- these have some way to go yet, I believe. Eg., commercial RE lags residential by 5-8 qtrs.
- rate cuts won't be a silver bullet for financial institutions carrying lots of bad debt.
Recently went short consumer goods & consumer services (as of June-July 2007).
- Mortgage equity withdrawal is drying up & savings-less US consumers will start to rein in spending.
- As our consumer-based economy cuts service workers, the service providers will suffer from loss of customers; vicious cycle ensues.
Long commodities since 2002/3, but reducing those positions.
- $USD decline should continue to boost apparent prices, but I worry that a US recession will be a strong headwind to materials for some time. I don't know that China will decouple from its largest customer (us) & thus the Chinese boom may slow.
- I could be exiting early here...but I think a US recession is tough to buck & may offer a better entry point later.
Long CHF, JPY & RMB.
- unwind of carry trades will boost CHF & JPY directly
- holding these as hedge against USD (& hence USD asset) declines
Long US bills & notes.
- in lieu of cash, these short -term issues will benefit ( are already benefitting) from the flight to safety
General methodology:
I recently decided to stop chasing individual equities (or gave up, depending on how you look at it). My realization: I don't have the necessary time to devote to researching & keeping tabs on a myriad of stocks...but I do have time to aggregate lots of info into broader, macro positions. I develop these ideas over time as evidence builds/ebbs, slowly shift positions & worry less about noisy day-to-day news items except as they affect the macro view.
I'm hoping discussions here will help me refine these macro ideas & provide alternate methods of capitalizing on them.
6 comments:
Currencies:
Obviously the Swiss Franc and the Japanese Yen are among the safer currencies. And, there is a lot of liquidity in the yen (useful if there is a massive flight).
But, my concern is that the Japanese are doing everything in their power to fight its appreciation. Not only that, but their economy is legitimately weak (with all the zombie companies), so there is something to be said for their intentions.
While it is smart to bet against these sorts of actions as a way to play the falling dollar, it is difficult to time
such things.
Although I am not in the Canadian dollar, I would think that country would allow its currency to rise significantly versus the dollar because they have a budget surplus, a strong economy, etc. They won't get burned as bad.
RE: not chasing stocks.
I like this approach because I would much rather try to get the macro worked out.
For example, I am pissed at myself for missing the huge bull market in oranges that is going on. I need broaden my vision.
yeah - CAD is definitely a good play. For CHF/JPY, I am hoping that the carry trade unwinds have a multiplying effect beyond simple appreciation against USD. I think the JPY can have a shattering move up before the BOJ can do anything about it - similar to what happened in 1997. CHF is more defensive - safe haven if the USD loses that status.
I am finding that with the recent proliferation of ETFs, there is often an outlet ready-made for a macro play...obviating the need to search out a particular, often flawed equity to achieve the same goal. Don't know if there is one for OJ yet...but I bet there will be soon...
if the carry trades unwind, you are going to see a lot of hedge funds go out of business!
Going against retail:
RTH has 15% in Home Depot and 5% in Amazon.
I take it that you're in SCC and SZK?
yeah - short retail for me = SCC & SZK
looked into RTH puts...but they have high premiums...
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